XZ concludet its first year of operations in which it made sales of $800.000, al

Question

XZ concludet its first year of operations in which it made sales of $800.000, all in installment.Collections during the year from down payments and installments totaled $300.000.Purchases for the year totaled $400.000; the cost of mechandise on hand at the end of the year was $80.000

Using the installment - sales mothod , make summary entries to record:
1. The installment sales and cash collections
2. The cost of installment sales
3. The unrealized gross profit
4. The realized gross profit

Please if you can provide some details will be great.Thank you

Explanation / Answer

1. Total yearly Sales 800.000 Installment Sales 300.000 Installment Collections 300.000 2. Cost of Installment sale: Purchased Stock - (A) 400.000 Less: Closing Stock - (B) 80.000 Cost of sales - (A-B) 320.000 800000 320.000 300000 - ? = 300000 * 320000 / 800000 = 120.000 3. Unrealized Gross Profit Remaining Sales(800.000 - 300.000) = 500.000 Remaining Cost of Sales(320.000-120.000) = 200.000 Unrealized Gross Profit = Remaining Sales - Remaining Cost of Sales = 500.000 - 200.000 = 300.000 4. Realized Gross Profit = Installment Sales - Cost of Installment Sales = 300.000 - 120.000 = 180.000 Assumption: I assumed installment sales is $300.000. Thank you.... Total yearly Sales 800.000 Installment Sales 300.000 Installment Collections 300.000

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